The present invention relates in general to reward programs to encourage customer loyalty, and particularly to automated reward programs operated through a financial institution.
Rewards programs are conventionally offered by merchants to customers via coupons, points programs such as frequent flyer miles, and the like. Such a program may provide a customer an incentive to do repeat business with a merchant, thus creating customer loyalty.
Currently merchants offer discounts, such as with a coupon, or electronically, most often with a gift card or points card which the customer present to a merchant using a specific point of sale (POS) hardware and software provider that facilitates the reward program. Across multiple merchants, such a discount program would require establishment of a common POS infrastructure at all merchants or running separate programs inside each POS network, which is cumbersome to manage.
Some discount programs apply the discount at the time of purchase, such as by using “points”, “miles”, or other intangible currencies to reward a customer. Such programs provide less, if any, incentive for a customer to return compared to a program that provides discounts or credits on future purchases in dollars that are more easily appreciated, understood, and used by the customer.
Available discount programs that provide cash back rewards are not specific to a merchant, but rather have been specific to the type of card such as a Discover Card® program. Thus, there is a need for customer discount programs that provide rewards in dollars, allow merchants to tailor discounts offered, provide an incentive for the customer to repeat purchases, and reduce capital investment on the part of the merchant.
Financial institutions are also merchants that offer “reward” programs to their account customers, originally by the customer earning interest on an average balance during a given time period. More recent financial institution-oriented reward programs have the rewards tied to either a) balances kept at the financial institution; b) multiple accounts at the financial institution; or c) points earned for each credit/debit card purchase or transaction amount whereby the points may be used to purchase merchandise or downloads from specific stores, catalogs or websites.
For many financial institutions, such as community banks and credit unions, many of these “reward” programs are run by third party vendors whereby the financial institution contracts with the third party vendor to administer the financial institution's program. The financial institution has little, if any, input in neither the “rewards” offered nor the merchants where the rewards may be redeemed. The financial institutions do not have the flexibility of making changes, additions nor even deleting merchants where rewards can be redeemed.
Thus, the problems that limit the ability of many financial institutions to offer reward programs to their own customers in order to provide incentives to their customers to use more of the financial institution's services, thus creating customer loyalty to the financial institution include: (a) the inability of financial institutions to allow customer usage of earned “rewards” to make purchases at merchants selected by the financial institution without 1) creating a catalog or online site with selected merchandise and 2) having pre-arranged costly agreements with such merchants; (b) many large merchants do not want to deal with smaller financial institutions, such as community banks and credit unions, to offer “rewards” to their customers and members, respectively; (c) the inability of such financial institutions to have the flexibility of pre-determining the “rewards” and the merchants within an automated rewards system; (d) the inability of a financial institution to automatically keep the unused and expired rewards, i.e. “breakage”, rather than the “merchant” or the third party vendor retained by the financial institution; (d) the costly equipment and software needed by a financial institution to operate a “rewards” program in-house; (e) the need to provide timely reports to the institution's customers of their “reward” usage and balances; (f) the present difficulties encountered by customers in redeeming their earned rewards; (g) the inability of a financial institution to offer a “reward” program based on a customer's account activity, not just the numbers of debit/credit card transactions and/or amounts; and (h) the inability for customers to transfer “rewards” to another account.
Thus, there is a need for financial institutions to set up and operate “reward programs” for their customers that use existing POS technology for specific customer markets which grants “rewards” that can be redeemed at any financial institution-designated merchants without costly, pre-arranged merchant agreements or interferences from the merchant or any other third-party and where the financial institution keeps the “breakage.” There is also a need for reward programs where the financial institution provides its customers with timely and recurring information about their rewards account and activity; provides its customers with the right and ability to transfer earned rewards to another account, and makes it easy for its customers to redeem the earned rewards.